I have spent 20 years working in nonprofit think tanks, the last 13 as a resident scholar with the Institute for Policy Innovation in Dallas. I also ran the Washington, D.C.-based Council for Affordable Health Insurance for nearly nine years. While I cover a range of political, economic and policy areas, I specialize in health policy. Prior to joining the think tanks, I taught philosophy. I received all three of my degrees—BBA in economics, masters in divinity and Ph.D. in humanities—from Texas universities. I was an ethicist for a medical school's panel reviewing human experimentation. I'm a member of the U.S. Commission on Civil Rights Texas Advisory Committee. For several years I was a political analyst for the USA Radio Network, and I hold a 6th degree black belt in Tae Kwon Do and still teach.

7/13/2011 @ 2:25PM231,102 views

What Happened to the $2.6 Trillion Social Security Trust Fund?

Here’s how President Barack Obama answered CBS’s Scott Pelley’s question about whether he could guarantee that Social Security checks would go out on August 3, the day after the government is supposed to reach its debt limit: “I cannot guarantee that those checks [he included veterans and the disabled, in addition to Social Security] go out on August 3rd if we haven’t resolved this issue. Because there may simply not be the money in the coffers to do it.”

And Treasury Secretary Timothy Geithner echoed the president on CBS’s Face the Nation Sunday implying that if a budget deal isn’t reached by August 2, seniors might not get their Social Security checks.

Well, either Obama and Geithner are lying to us now, or they and all defenders of the Social Security status quo have been lying to us for decades. It must be one or the other.

Here’s why: Social Security has a trust fund, and that trust fund is supposed to have $2.6 trillion in it, according to the Social Security trustees. If there are real assets in the trust fund, then Social Security can mail the checks, regardless of what Congress does about the debt limit.

President Obama’s budget director, Jack Lew, explained all this last February in USA Today:

“Social Security benefits are entirely self-financing. They are paid for with payroll taxes collected from workers and their employers throughout their careers. These taxes are placed in a trust fund dedicated to paying benefits owed to current and future beneficiaries. … Even though Social Security began collecting less in taxes than it paid in benefits in 2010, the trust fund will continue to accrue interest and grow until 2025, and will have adequate resources to pay full benefits for the next 26 years.”

Notice that Lew said nothing about raising the debt ceiling, which was already looming, and it shouldn’t matter anyway because Social Security is “entirely self-financing” and off budget. What could be clearer?

Unconvinced, syndicated columnist Charles Krauthammer wrote a subsequent column questioning Lew’s assertions. “This [Lew’s] claim is a breathtaking fraud. The pretense is that a flush trust fund will pay retirees for the next 26 years. Lovely, except for one thing: The Social Security trust fund is a fiction. … In other words, the Social Security trust fund contains—nothing.”

Social Security status-quo defenders have assured us for the past 25 years that Social Security is fully funded—for the next 25 years, or 2036. So if there are real assets in the Social Security Trust Fund—$2.6 trillion allegedly—then how could failure to reach a debt-ceiling agreement possibly threaten seniors’ Social Security checks?

The answer is that the federal government has borrowed all of that trust fund money and spent it, exactly as Krauthammer asserted. And the only way the trust fund can get some cash to pay Social Security benefits is if the federal government draws it from general revenues or borrows the money—which, of course, it can’t do because of the debt ceiling.

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The loss to a personal social security account would have been worse from the recession, as a lot of people lost a lot of retirement savings when their 401K got almost cut in half, like my dad’s and my own. The most valuable thing I did during that time was cash mine out, because even now it would not have recovered. Putting retirement only in personal accounts is insanity, and an account that is matched by social security coming from taxes is the only solution.

So let me get this straight. You were smart enough to get out of the market but you argue the individuals shouldn’t be given a chance because they aren’t a savvy as you. How arrogant and typical of a liberal with you ruling class mind set. Oppress individual choice over retirement because the State, the collective, can do better. Individuals fully invested in the DIAs with no low risk instruments have lost 11.2% since the all time high in 2008. On the other hand the government has lost 100% of the money in their “lockbox.” Who is getting slaughtered? PS-I noticed your strawman argument liberals like to play. No one on teh right has ever put forth a proposal to put 100% of SS in private accounts. Give 1/3 and let the government take 2/3 and let’s see who does better. It is my money you know…

No, you didn’t read what I said. I said putting retirement ONLY in personal accounts is insanity. The only solution is to create a personal account and have the government match contributions like your employer does. There needs to be a safety net for people on social security in the event of a market crash. Retirement accounts should not go burning down with the market.

dhinged, did you even read this column? Can you think beyond the superficial? The president is behaving precisely like Mark Halperin said. Even though Obama and his dorks have plenty of money to send out checks after Aug. 2 if the debt ceiling isn’t raised, they technically don’t HAVE to. There is no safety net, there is no surplus of SS money. It’s gone – been gone for a long time. Duh – private investments would have taken a hit the past few years, which is BETTER than you can say for the federal government, because it has no money. All it can do is take it from people. All these leeches do is take, take, take.

You’re a fool for thinking these clowns are looking out for you or anyone else who isn’t part of their leftist political clique. Their using you and your dad and everyone else so they can cling to their power.

nobama- at this point it doesn’t make much difference what any of us do. Clinton “balanced” the budget by looting SS(replacing dollars with worthless IOUs). All prezes have continued the tradition. Like Madoff admitted,(and he should know) our whole debt based, fractional reserve banking system is a PONZI scheme. It’s just a matter of time before the printing presses outrun and destroy the dollar. Brace yourself. It’s gonna get real ugly fast.

Yes, I read the whole column and I can think beyond the superficial. The safety net is unfortunately coming from borrowing, but at least it’s there. With free market, hey if it’s gone it’s gone! Sorry sucker!

The surplus was spent and social security has been borrowed into it’s last dime several times irresponsibly by both Democrats and Republicans, so you’re going to get some of that spray on you too. I absolutely know guys like Eric Cantor care more about his corporate buddies than he does the common man, but Obama at least speaks and fights for the common man, even though he keeps capitulating to the right and giving them their wealthy tax breaks and medicare cuts, and regardless of any of that, putting retirement SOLELY into the market is purely stupid, as anybody who’s been paying attention to the market since the Great Depression can tell you.

You have obviously bought into the liberal class-warfare rhetoric. Even if they took 100% of the wealth of the wealthy, it would only cover 9 days and 23 hours of federal government deficit spending. It’s not the rich’s fault we are in trillions of dollars in debt. It is the government’s fault, both democrat and republican. Over regulation and over taxation has forced many manufacturing companies to go overseas. Tax revenue is generated by people having jobs who pay into the tax system. The problem is half of America does not pay income taxes. Unemployment is through the roof because the government is making conditions impossible to create jobs. And the rich, of whom you think is not paying enough taxes, has enough wealth to leave America to go and pay taxes in other countries who will not penalize their success. Many of them have done just that. The only way to fix this problem is to be honest. Social Security is being paid out of borrowed money. The status quo is unsustainable. Tax increases will take money away from the economy and increase government liabilities that will put us further into debt. Go to YouTube and put Marco Rubio in the search and see any of the videos on him from C-Span on the Senate Floor discussing real solutions to our debt crisis. We need new taxpayers, not new taxes. And the progress of a president should be measured by job statistics…

Just imagine how much better off we and the country would be if we all had personal retirement accounts rather than social security fraud accounts. They can’t raid the accounts when there are personel accounts.

Seems similar to pension fund issues. Pensionh funds are assets of the company. The company got taken over and then pension funds raided. That I believe is against the law these days.